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How to Grow a Diversified Investment Portfolio

February 28, 2022 | Financial Advice Investment

Investing might be risky, but it is one way to grow your money. While there is no chance of securing your finances 100%, there is a way to manage the risks and hopefully secure your desired returns. Furthermore, you can spread your wealth and protect it against market volatility and other uncertainties.

Creating a diversified portfolio might be confusing and intimidating for many, but it is the best way to invest. Here is a list of what you should keep in mind when building your diversified portfolio:

Determine the Level of Risk You Are Willing to Take

Investing money is a risky move. No one knows when and how deep the market will fluctuate, but the market’s movement will affect your investments. The extent of the effects depends mainly on what kind of risks you take.

The higher the risk, the more chances of getting a return; the higher chance of losses as well. Everything is about achieving a balance and learning which asset types you are willing to invest money in.

To find out the level of risk you plan to have, here are some questions you need to assess:

  • How much of your investment money can you risk on an investment? The answer to this question depends on many other factors, like how much income you are using for investments, your existing debt commitments, lifestyle expenses, and your current age.

Usually, the younger the investor, the more they are willing to risk for the chance of a higher return. While those about to retire usually play it safe and opt for low-risk investments. In short, you can decide based on your capacity to risk what you already have.

  • How much do you need to risk? There are instances whereby you can only reach your set financial goals on time when you increase the risk now.

For example, if you want to retire early. Placing your retirement money in a higher-risk investment can give you a higher yield at a faster rate. But again, there is no guarantee that the market will keep performing well throughout your timeframe. This only means that your decisions can also depend on your financial goals.

  • How much are you willing to risk? If the first two are dependent on many other factors, the answer to this question is all about your personal preference as an investor. It all depends on you and what you want to do with your money.
  • How long is your investment timeframe? This question will bring you back to your financial goals. If you plan to have a grand vacation soon using your investment money or if you want to renovate your house, then you should consider a short-term investment. The longer you have, the more you can grow it, regardless of your risk appetite.

There is no secret formula that will ensure the growth of your money, but there are financial consultants who study the market so they can recommend the best decisions. The number one factor is the type of risk you are willing to take for your investment, and they can help you assess what appetite is best for your goals.

If you do not have a financial adviser yet or are looking for a more reliable one, we can help at Coastal Advice Group. Our goal is to support our clients and help them create their ideal lifestyle from now into retirement. We have a team of highly qualified, experienced, and award-winning financial advisers to serve our clients. Contact us today so we can start discussing how to unlock your financial potential.

DISCLAIMER: Coastal Advice Group Pty Ltd is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.

(Trading names of Coastal Advice Group Pty Ltd include Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Compass Advice Port Macquarie, Wealth for Life Financial Planning and Coastal Advice Group Brighton/Somerton Park).

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